BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 862
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          (  Without Reference to File  )

          SENATE THIRD READING
          SB 862 (Budget and Fiscal Review Committee)
          As Amended  June 13, 2014
          Majority vote.  Budget Bill Appropriation Takes Effect  
          Immediately

           SENATE VOTE  :Vote not relevant

           SUMMARY  :  Implements, as part of the 2014-15 budget, the Cap and  
          Trade expenditure plan for expenditure of Greenhouse Gas  
          Reduction Funds and creates specific state programs for that  
          purpose.  Specifically,  this bill  :

          1)Articulates legislative intent that the Cap and Trade  
            investment fund in the following investment areas:

             a)   Transit, Affordable Housing, and Sustainable  
               Communities;

             b)   High Speed Rail;

             c)   Low Carbon Transportation;

             d)   Energy Efficiency and Renewable Energy;

             e)   Natural Resources and Waste Diversion.

          2)Creates a Cap and Trade programs to allow for expenditures:

             a)   Transit, Affordable Housing, and Sustainable  
               Communities;

             b)   Transit and Intercity Rail Program;

             c)   Low Carbon Transit Operations Program;

             d)   High Speed Rail Program;

             e)   Clean Vehicle Rebate Project;

             f)   Energy Efficiency State Property Revolving Fund;









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             g)   Program Timberland Environmental Impact Report for  
               Carbon Sequestration and Fuel Reduction Program;

             h)   Waste Diversion and Greenhouse Gas Reduction Financial  
               Assistance Program.

          3)Establishes accountability and reporting provisions for Cap  
            and Trade investment.

             a)   Requires each state agency to demonstrate to the  
               California Air Resources Board how expenditures reduce  
               greenhouse gas emissions;

             b)   Requires the California Air Resources Board to develop  
               guidelines for this purpose;

             c)   Articulates that Cap and Trade expenditures must have a  
               clear nexus to the greenhouse gas reduction goals; 

             d)   Stipulates that overall Cap and Trade expenditures must  
               comply with existing statutory requirements that at least  
               25% of the funds are spent at on disadvantaged communities.

          4)Creates the Transit, Affordable Housing and Sustainable  
            Communities Program which contains several distinct  
            programmatic funding areas:

             a)   Affordable Housing and Sustainable Communities program,  
               a competitive grant program administered by the Strategic  
               Growth Council.

               i)     States the goals of the Affordable Housing and  
                 Sustainable Communities program are:

                  (1)       Reducing air pollution;

                  (2)       Improving conditions in disadvantaged  
                    communities;

                  (3)       Supporting public health;

                  (4)       Improving connectivity and accessibility;

                  (5)       Increase mobility to implement of Active  








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                    Transportation Program;

                  (6)       Increase transit ridership;

                  (7)       Preserving and developing affordable housing,  
                    as defined Health and Safety Code Section 50079.5;

                  (8)       Protecting agriculture lands to support infill  
                    development.

               ii)    Requires all program funding demonstrate reduction  
                 in greenhouse gases emissions, support implementation of  
                 a sustainable communities strategy, and demonstrate  
                 consistency with state planning priorities.

               iii)   Articulates projects that may be eligible for  
                 funding, the list includes, but is not limited to:

                  (1)       Intermodal affordable housing projects;

                  (2)       Transit capital projects that support transit  
                    ridership;

                  (3)       Active transportation programs, such as  
                    bicycle and pedestrian programs;

                  (4)       Non-infrastructure related active  
                    transportation programs;

                  (5)       Transit-oriented development projects;

                  (6)       Complete streets capital projects;

                  (7)       Acquisition or other approaches to protect  
                    agricultural lands that are under pressure of being  
                    converted to non-agriculture uses;

                  (8)       Planning and support of sustainable  
                    communities' strategies.

               iv)    Requires the Strategic Growth Council to develop  
                 guidelines, in consultation with the California Air  
                 Resources Board, to implement this program.  The  
                 guidelines must be developed in a public process and with  








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                 the coordination of metropolitan planning organizations. 

               v)     Sets a programmatic goal that 50% of all Affordable  
                 Housing and Sustainable Communities funding benefit  
                 disadvantaged communities.

             b)   Transit and Intercity Rail Capital Program, a grant  
               program for transport and rail related capital projects  
               that is administered by the State Transportation Agency and  
               awarded by the California Transportation Commission.

               i)     Articulates projects that may be eligible for  
                 funding:

                  (1)       Rail capital projects including rail cars and  
                    improving connectivity to existing and future rail  
                    systems;

                  (2)       Intercity, commuter, and urban rail projects  
                    that increase service levels, improve reliability, and  
                    decreases travel time;

                  (3)       Rail and transit integration, including  
                    integrated ticketing and scheduling;

                  (4)       Bus Rapid Transit and other bus transit  
                    investments.

               ii)    Requires that the all expenditures demonstrate a  
                 reduction in greenhouse gas emissions as a condition for  
                 funding.

               iii)   Sets a programmatic goal that 25% of Transit and  
                 Intercity Rail benefit disadvantaged communities.

               iv)    Requires the California Transportation Commission to  
                 consider co-benefits in awarding funding.

               v)     Requires the Transportation Agency  to develop  
                 guidelines through a public process.

             c)   Low Carbon Transit Operations Program, which provides  
               funding through the existing State Transit Assistance  
               program  to reduce greenhouse gas emissions by supporting  








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               new or expanded bus or rail services or expanded intermodal  
               transit facilities.  

               i)     These funds will be distributed by the State  
                 Controller to local agencies through the existing  
                 statutory funding formula;

               ii)    Requires Caltrans, in coordination with the  
                 California Air Resources Board, to develop guidelines for  
                 the use of these funds, each transit agency must have a  
                 plan approved by Caltrans prior to expenditure of funds;

               iii)   Requires 50% of funding spent on programs benefit  
                 disadvantaged communities, this provision only applies to  
                 local agencies that have identified  disadvantaged  
                 communities in their service area.

          5)Creates the Energy Efficiency and Renewable Energy program for  
            the use of Cap and Trade funds for weatherization activities  
            in low income communities.  Requires the Department of  
            Community Services and Development to develop guidelines for  
            the program.

          6)Amends the Energy Efficiency State Property Revolving Fund to  
            allow for the use of Cap and Trade funds for a revolving loan  
            fund to finance energy efficiency activities in State  
            owned-buildings.

          7)Creates the Program Timberland Environmental Impact Report for  
            Carbon Sequestration and Fuel Reduction Program, administered  
            by the Department of Forestry and Fire Protection, which  
            allows the use of Cap and Trade funds for carbon sequestration  
             and to resist wildfires through agreements with landowners.

          8)Creates the Waste Diversion and Greenhouse Gas Reduction  
            Financial Assistance program, a revolving loan program  
            administered by CalRecycle to fund organic composting,  
            anaerobic digestion and recycling. 

          9)Allows renewable energy projects at the California Department  
            of Corrections and Rehabilitation to be included in net energy  
            metering as an eligible customer-generator.

          10)Continuously appropriates, beginning in 2015-16, 60% of  








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            annual Cap and Trade revenues for the following purposes:

             a)   Thirty-five percent of the total Cap and Trade Revenues  
               are appropriated to the Transit, Affordable Housing and  
               Sustainable Communities program.  These funds are allocated  
               within this program as follows:

               i)     Twenty percent of total Cap and Trade revenues are  
                 appropriated for the Affordable Housing and Community  
                 Services program.  Half of these funds, 10% of the total  
                 Cap and Trade Revenue, must be used for affordable  
                 housing;

               ii)    Ten percent of total Cap and Trade revenues are  
                 appropriated for the Transit and Intercity Rail Capital  
                 Program;

               iii)   Five percent of total Cap and Trade revenues are  
                 appropriated to the Low Carbon Transit Operations  
                 program.

             b)   Twenty-five percent of total Cap and Trade Revenues are  
               appropriated to the High Speed Rail Authority for costs  
               associated with constructing the High Speed Rail system and  
               the repayment of loans made to fund the project.

          11)Dedicates the $400 million owed to the Greenhouse Gas  
            Reduction fund from the General Fund to the High Speed Rail  
            when the loan is repaid.

          12)Appropriates $20 million in Greenhouse Gas Reduction revenue  
            for the Clean Vehicle Rebate project to replace existing  
            Vehicle Inspection and Repair Account and Air Quality  
            Improvement Fund revenues currently dedicated for that  
            purpose.

          13)Expands the membership of the Strategic Growth Council to  
            include two public members, one appointed by the Assembly and  
            one appointed by the Senate.

          14)Contains a severability clause.

           FISCAL EFFECT :  The 2014-15 budget includes $832 million of Cap  
          and Trade funding for programmatic purposed outlined in this  








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          bill.  In addition, 60% of all future Cap and Trade fee revenue  
          are appropriated by this bill.

           COMMENTS  :  This budget implementation bill creates the  
          programmatic structure for the expenditure of Cap and Trade  
          funds.  For the 2014-15 budget year, it provides the necessary  
          programmatic framework to allow for funds appropriated in the  
          budget to be expended in a manner consistent with existing state  
          policies.  

          In specific, this bill creates structures to allow Cap and Trade  
          funds to flow to investment areas identified by the State  
          Investment Plan, as created by AB 1532 (John A. Pérez) Chapter  
          807, Statutes of 2012.  This plan was created to implement the  
          intent of AB 32 (Núñez), Chapter 488, Statutes of 2006, which  
          established the Cap and Trade mechanism to reduce the emission  
          of greenhouse gases that contribute to climate change.  In  
          addition, this bill insures the goal of SB 535 (De León),  
          Chapter 830, Statutes of 2012, that 25% of all Cap and Trade  
          funds benefit disadvantaged communities is met through the  
          expenditure of these funds.  This bill also insures the local  
          planning efforts required by SB 375 (Steinberg), Chapter 728,  
          Statutes of 2008, are reflected in the investment of funds for  
          sustainable community efforts.  Finally, this bill has  
          accountability mechanism to insure that state investments  
          demonstrate and verify reductions of greenhouse gas emissions,  
          to insure a tight fee nexus required by the California  
          Constitution Article XIII.

          For 2015-16 and beyond, this bill appropriates 60% of the Cap  
          and Trade funds.  Of this amount, 25% of all Cap and Trade funds  
          are continuously appropriated for High Speed Rail construction  
          related activities.  Additionally, 35% is for the Transit,  
          Affordable Housing and Sustainable Communities program.  This  
          program has three major components which are distinct and have  
          their own dedicated appropriation articulated by this bill: 

          1)Twenty percent of all ongoing Cap and Trade funds are  
            continuously appropriated for the Affordable Housing and  
            Sustainable Communities program, a grant program administered  
            by the Strategic Growth Council.  Of this amount, half of the  
            funds must be used for affordable housing.

          2)Ten percent of all ongoing Cap and Trade funds are  








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            continuously appropriated for the Transit and Intercity Rail  
            Capital Program, a grant program for transport and rail  
            related capital projects that is administered by the State  
            Transportation Agency and awarded by the California  
            Transportation Commission.

          3)Five percent all ongoing Cap and Trade funds are continuously  
            appropriated for the Low Carbon Transit Operations Program,  
            which provides funding through the existing State Transit  
            Assistance program to reduce greenhouse gas emissions by  
            supporting new or expanded bus or rail services or expanded  
            intermodal transit facilities.  


           Analysis prepared by :    Christian Griffith / BUDGET / (916)  
          319-2099


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